Factual and Procedural Background
This appeal arises from a judgment of Master Wright, Costs Judge, delivered on 24 October 2001, concerning the assessment of costs payable by the Appellant (the Minister) to the Respondents (the Claimants) in the context of the Factortame litigation. The Claimants, Anglo-Spanish fishing companies, had successfully challenged the legality of certain UK legislative provisions that excluded them from fishing in British waters, ultimately securing damages for the Government's breach of Community law.
The dispute in this appeal concerns the recoverability of fees paid by the Claimants to an accounting firm, Company A (Grant Thornton), under agreements where Company A was to receive 8% of the final settlement as payment. The Minister contended these agreements were champertous and thus unenforceable, while the Costs Judge held they were not. The appeal addresses whether that ruling was correct.
The background includes a complex litigation history involving judicial review, references to the European Court of Justice, and multiple appeals. The Claimants faced severe financial difficulties during the litigation, and Company A provided forensic accountancy and administrative services essential to assessing damages.
Two sets of agreements are relevant: the 1998 Agreements, under which Company A agreed to fees based on 8% of damages recovered, and the 2000 Agreements, which addressed the allocation of generic costs among multiple claimants. The Claimants had divided into fast track and slow track groups for damages assessment, with the appeal concerning the fast track Claimants represented by their solicitors, Company B (Thomas Cooper & Stibbard).
Legal Issues Presented
- Whether the 1998 Agreements between the Claimants and Company A were champertous and thus unenforceable.
- If the 1998 Agreements were champertous, whether parts of the 2000 Agreements relating to generic fees could be severed and enforced independently.
- Whether statutory provisions governing conditional fee agreements apply to agreements for ancillary litigation services provided by non-solicitors such as Company A.
- The extent to which public policy concerns about champerty apply to experts or ancillary service providers contracted on a contingency fee basis.
Arguments of the Parties
Appellant's Arguments
- The agreements with Company A were champertous because they gave Company A a financial interest in the outcome of the litigation and entitled them to a share of the damages recovered.
- Company A’s services were akin to those provided by solicitors and experts, thus subject to statutory and common law restrictions on contingency fees and champerty.
- The agreements conflicted with public policy protecting the integrity of justice by preventing persons with an interest in the litigation’s outcome from influencing it improperly.
- Statutory provisions, particularly section 58 of the Courts and Legal Services Act 1990 (as amended), render such contingency fee agreements unenforceable if not concluded by authorised persons conducting litigation.
Respondents' Arguments
- The 1998 Agreements were not champertous as Company A had a legitimate interest in recovering their outstanding fees and did not act as solicitors or authorised persons conducting litigation.
- Company A provided ancillary services, not litigation or advocacy services, and engaged independent experts to avoid conflicts of interest.
- The agreements facilitated access to justice for impecunious Claimants who otherwise could not fund complex damages assessments.
- Statutory provisions on conditional fees apply only to solicitors or authorised persons with rights to conduct litigation, not to ancillary service providers like Company A.
- The 8% fee was reasonable and capped, mitigating any risk of unethical conduct or inflating damages.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Hill v Archbold [1968] 1 QB 686 |
Champerty and maintenance depend on public policy, which evolves over time. |
Used to emphasize the flexible nature of public policy in assessing champerty claims. |
| Trendtex Trading v Credit Suisse [1980] 1 QB 629 |
Public policy prohibits officers of the court from having conflicting interests via contingency fees. |
Referenced to highlight concerns about conflicts of interest in contingency fee arrangements. |
| Trepca Mines Ltd (No.2) [1963] 1 Ch 199 |
Champerty condemned due to risks of inflating damages or suppressing evidence. |
Supported the court’s caution regarding contingency fee agreements and potential abuses. |
| Giles v Thompson [1994] 1 AC 142 |
Champerty test focuses on whether an agreement tends to corrupt public justice, protecting defendants’ interests. |
Guided the court’s analysis on the tendency of the agreements to undermine justice. |
| British Cash and Parcel Conveyors Ltd v Lamson Store Service Co. Ltd [1908] 1 KB 1006 |
Champerty involves wanton intermeddling with others’ disputes for profit. |
Adopted as the foundational public policy test for champerty applied to the agreements. |
| Wallersteiner v Moir (No 2) [1975] QB 373 |
Contingency fees for solicitors are illegal due to conflict of interest between lawyer’s role and personal gain. |
Supported the distinction between solicitors and ancillary service providers regarding contingency fees. |
| Awwad v Geraghty [2001] QB 570 |
Common law does not permit conditional fee agreements outside statutory requirements. |
Confirmed statutory circumscription of contingency fees for litigation services. |
| Bevan Ashford v Geoff Yeandle (Contractors) Limited (in Liquidation) [1999] Ch 239 |
Section 58 provisions apply analogously to arbitration conducted by solicitors. |
Used to support statutory interpretation limiting contingency fees to authorised litigation conductors. |
| Pepper v Hart [1993] AC 593 |
Hansard may be used to interpret legislative intent where ambiguity exists. |
Supported reference to parliamentary debates clarifying section 58’s scope. |
| Whitehouse v Jordan [1981] 1 WLR 246 |
Expert evidence must be independent and uninfluenced by litigation interests. |
Supported the principle that experts should not have contingent interests affecting their impartiality. |
| Field v Leeds City Council (unreported 1999) |
Employment by a party does not automatically disqualify an expert witness. |
Demonstrated that expert independence is a matter of fact and case management. |
| Liverpool Roman Catholic Archdiocesan Trustees Inc. v Goldberg (No. 3) [2001] 1 WLR 2337 |
Expert evidence may be inadmissible if a reasonable observer would perceive bias due to relationships. |
Highlighted the test of apparent bias applicable to expert witnesses. |
| Hamilton v Al Fayed [2002] EWCA Civ 665 |
Funding arrangements facilitating access to justice, including conditional fees and no-win-no-fee experts, serve public interest. |
Supported the court’s recognition of the public interest in enabling access to justice despite contingent fee arrangements. |
Court's Reasoning and Analysis
The court analyzed the nature of the agreements and services provided by Company A, concluding that Company A did not conduct litigation or provide advocacy services requiring authorization under the Courts and Legal Services Act 1990. Their role was ancillary, including forensic accountancy, evidence gathering, liaison with independent experts, and advising on settlement offers. Company B (Thomas Cooper) retained conduct of the litigation at all times.
Statutory provisions on conditional fee agreements (section 58 of the 1990 Act, as amended) were interpreted as applying only to solicitors or authorised persons conducting litigation or providing advocacy. The court found no legislative or policy basis to extend these provisions to ancillary service providers like Company A.
Regarding champerty, the court applied the established public policy test focusing on whether the agreement tended to corrupt public justice, particularly by protecting defendants from improper influence. It found that although Company A had a financial interest contingent on success, this was a legitimate interest arising from the Claimants’ impecuniosity and need to fund complex damages assessment. The 8% fee was reasonable and capped, reducing temptation to unethical conduct.
The court noted that Company A took care to engage independent expert witnesses to avoid conflicts of interest and did not have control over the litigation or settlement decisions, which remained with Company B and the Claimants. The joint and transparent development of damages models with Government experts further mitigated concerns about corrupting influence.
Consequently, the court held that the 1998 Agreements did not constitute champerty or maintenance contrary to public policy, and the contingency fee arrangements were permissible in the circumstances without undermining the integrity of justice.
Holding and Implications
The court DISMISSED THE APPEAL, upholding the Costs Judge’s determination that the 1998 Agreements were not champertous and were enforceable.
The direct effect is that the Claimants are entitled to recover costs paid under the 1998 Agreements to Company A. No further issues remain for determination on this appeal. The decision does not establish new precedent but confirms that contingency fee arrangements with ancillary service providers who do not conduct litigation are not necessarily contrary to public policy on champerty, particularly where they facilitate access to justice without compromising the integrity of the litigation process.